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Fitch keeps AAA US credit rating but dims outlook
Started:November 28th, 2011 (07:49 PM) by kbit Views / Replies:496 / 0
Last Reply:November 28th, 2011 (07:49 PM) Attachments:0

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Fitch keeps AAA US credit rating but dims outlook

Old November 28th, 2011, 07:49 PM   #1 (permalink)
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Fitch keeps AAA US credit rating but dims outlook

WASHINGTON (AP) -- Fitch said Monday that it will keep its rating for long-term U.S. debt at the top AAA level, despite a congressional panel's failure to agree on long-term deficit cuts. But it is lowering its outlook to negative.
The rating agency said it has less confidence in the federal government's ability to take the necessary steps to rein in the deficit.

A special congressional panel failed last week to reach agreement on $1.2 trillion in deficit cuts over the next decade. The impasse triggered automatic cuts of the same amount, which are scheduled to kick in beginning in 2013.
Moody's Investors Services and Standard & Poor's also left their ratings unchanged last week. But Moody's and S&P warned that they could lower their ratings if Congress backed off the automatic cuts.

S&P downgraded long-term U.S. debt in August to the second-highest level, AA-plus, and switched its outlook to negative. It was the first time the credit rating agency had lowered the nation's AAA rating since granting it in 1917.
Fitch, Moody's and S&P, the three major rating agencies, assess the creditworthiness of debt issued by countries, corporations and municipalities. Ratings are based on the likelihood of default. The AAA rating is the highest available and signifies an extremely low likelihood of default.

Fitch said the switch to a negative outlook meant the credit agency believed there was slightly greater than a 50 percent chance it would downgrade long-term U.S. debt in the next two years. Fitch said it did not expect Congress to reach agreement on deficit cuts until 2013. A failure to enact cuts by then would likely prompt the agency to downgrade U.S. credit, Fitch said.

"By postponing the difficult decisions on tax and spending until after forthcoming congressional and presidential elections, the scale and pace of required deficit reduction will consequently be greater," Fitch said in its statement.
S&P's downgrade came days after Congress barely resolved a prolonged fight over raising the nation's borrowing limit to avoid a potential default on the nation's debt.

U.S. lawmakers ultimately agreed to spending cuts that would reduce the debt by more than $2 trillion. They left much of the details to the newly created supercommittee, which had until Nov. 21 to agree on $1.2 trillion in cuts.

In August, S&P appeared to cast doubt on the committee's ability to meet that goal. It said it lowered the U.S. credit rating because of politics that slowed the debt limit increase and not because it thought the U.S. couldn't pay its bills. S&P then said that it was "pessimistic about the capacity of Congress and the administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics anytime soon."

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